Reopening us 147 for accommodation entries quashed. AO did not describe how and what manner assessee received entries from operators and paid cash.
Case Law Details:
Dhanuka Agritech Ltd vs. ACIT
ITA No. 1003/Del./2014 : AY : 2003-04
Date f Order/Judgment: 11/05/2016
Brief Facts of the Case:
After the earlier assessment of the assesse was completed u/s 143(3), the Assessing Officer (AO) reopened the assessment u/s 147 of the Income Tax Act, 1961 by issuing notice u/s 148. The reasons recorded by the assessee stated the case was reopened on the specific information received from the Investigation Wing that the assessee had indulged in receiving accommodation entries and received Rs. 11 lakhs from various entry operator.
However, the assessee did not file the return of income in compliance to the said notice within the stipulated time and asked for the copy of reasons recorded for re-opening the assessment.
The AO made the addition of Rs. 11,00,000/-.
The assessee apealed to CIT(A) and challenged the validity of the re-opening done by the A.O. by issuing the notice u/s 148. However, CIT(A) held that the AO had reasons to believe that income had escaped the assessment and he was within his competence while invoking the powers contained in section 147. Moreover, CIT(A) also observed that there was no provision in section 148 of the Act that reasons for re-opening should also be given within the limitation period. Now the assessee is in appeal.
The assessee approached ITAT against the order of CIT(A).
Important Excerpts from ITAT Judgment:
the AO in the reasons recorded mentioned that it had come to his knowledge that the persons from whom amount was received were entry operator and provided the entries to the assessee after receiving the amount in cash, however, nothing was brought on record that how and in what manner the persons from whom the assessee received the loans were entry operator and that as to how the cash was paid by the assessee. In fact the aforesaid conclusion of the A.O. is unhelpful in understanding as to whether the AO applied his mind to the material, particularly when he did not describe how and what manner it came to his knowledge that the assessee receive the accommodation entries. We, therefore, by keeping in view the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case of Principal Commissioner of Income-tax vs. G & G Pharma India Ltd., are of the view that the reopening done by the AO u/s 147 of the Act was not valid and accordingly the subsequent assessment framed by the AO was void-ab-initio and therefore the same is quashed